Background: Why HYPE Is Seen as an "On-Chain CEX"
In its latest research report, Multicoin Capital argues that Hyperliquid differs significantly from typical decentralized exchanges (DEXs). Its architecture and revenue model more closely resemble those of a centralized exchange (CEX). HYPE, the protocol's native token, serves as the core vehicle for governance and revenue distribution. With the current price hovering around $80, the base-case scenario projects HYPE reaching $319 by 2028, representing roughly 4x upside. The valuation rests on five pillars: market share, revenue retention mechanisms, market deployment innovation, stablecoin reserve yields, and user acquisition expansion.
Breaking Down the Five Core Pillars
1. High Trading Share and Protocol Revenue
Hyperliquid has captured a significant share of the perpetual futures market, largely thanks to its on-chain order book depth and matching speed that rival CEXs. Fee revenue continues to grow. The report assumes that as long as Hyperliquid maintains its current market share and the overall derivatives market expands, protocol revenue will remain on a high growth trajectory.
2. 99% Revenue to Buyback and Burn
Unlike traditional CEXs that distribute most profits to shareholders, Hyperliquid allocates 99% of its protocol revenue (after operational costs) to open-market buybacks and subsequent burning of HYPE. This directly reduces the circulating supply, providing long-term price support. The remaining 1% goes to an ecosystem fund. This mechanism is the core driver of HYPE's scarcity premium in the valuation model.
3. HIP-3 Market Deployment Mechanism
The HIP-3 proposal allows the community to create new perpetual trading pairs through governance, lowering the barrier for project listing and accelerating market expansion. This mechanism not only attracts more traders but also generates additional revenue through liquidity incentive programs, forming the basis of an ecosystem flywheel.
4. USDC Reserve Yields
Hyperliquid holds a large pool of user-collateralized USDC reserves. These funds generate interest income via on-chain protocols such as Aave or through RWA treasuries (e.g., U.S. Treasury bills). Although this passive income stream is relatively small, it provides stable, non-trading cash flow and diversifies revenue sources.
5. Wallet Onboarding Expansion
Hyperliquid plans to launch a non-custodial wallet and multi-chain bridging services to lower the entry barrier for new users. This initiative is expected to enlarge the user base and funnel external liquidity into the protocol, further boosting trading volume and fee revenue.
Valuation Relies on Revenue Delivery; Risks Remain
Multicoin Capital emphasizes that the $319 base-case valuation is built on the assumption of a ~60% compound annual growth rate in protocol revenue. Should market share decline, competition intensify (e.g., from dYdX or new on-chain CEXs), or the buyback-and-burn program be scaled back, actual prices could fall significantly short of the target. Additionally, potential technological risks (e.g., concerns over node centralization) and regulatory uncertainty (regarding U.S. compliance for derivative trading platforms) represent headwinds. Investors should fully understand these assumptions and risks before positioning in HYPE.